Home Forex Dollar Soars on Fed Rate Hike, Pound Tumbles to 2-Week Low

Dollar Soars on Fed Rate Hike, Pound Tumbles to 2-Week Low

hundred dollar bills

The dollar soared to a 14-year high against other major currencies on Thursday after the U.S. Federal Reserve raised rates and hinted that future hikes may come at a faster pace than anticipated in 2017.

The Fed raised its benchmark interest rate by 25 basis points in a move that was widely expected by markets. The central bank also signaled that rates would rise three times in 2017, which drove the dollar higher.

Higher rates make the dollar more attractive to yield-seeking investors.

Five of 17 Fed policymakers have boosted their outlook for interest rate hikes since September.

U.S. Treasury yields also surged on news of the Fed’s decision.

The dollar climbed to a 10-month high against the yen, up 0.68% to 117.8. The greenback is on track to secure its strongest quarter against the yen in more than two decades.

The euro fell 0.31% to trade at 1.0501 after hitting a low of 1.0469 overnight.

The currency found support after data showed the private sector in the euro zone continued its steady pace of expansion.

The pound, meanwhile, was trading at a two-week low against the dollar after the Bank of England held rates. The central bank said the decision to hold rates was unanimous.

Sterling fell 0.7% to 1.2476 against the dollar, its lowest level since November 30. The pound was also weaker against the euro, easing 0.31% to 0.8354.

Monetary policy committee members also decided in a 9-0 vote to maintain the bank’s bond-buying program target, and move forward with its plan to buy corporate bonds up to £10 billion.

The BoE expects inflation to reach its 2% target within the next six months.

Data out of the U.K. on Tuesday showed that the rate of inflation hit a two-year high in November at 1.2%.

The dollar index was up 0.95% to 103, its highest levels since 2003.

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Stephanie Caudle
Stephanie Caudle is a mother, wife, author, AIDS advocate and Web Marketing Consultant. She seeks to inspire, encourage and motivate young women. A former ambassador for Source Hip Hop Magazine and the iconic brand (RED) Stephanie continues to hold true to her entertainment roots as the Managing Editor of her own site "She’s My Superwoman", a website dedicated to showcasing women in health, fitness, fashion, politics, entertainment and business who have overcome great obstacles in order to become the women they are today.